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2014 (5) TMI 661 - ITAT HYDERABADCalculation of depreciation – Adjustment of grants-in-aid received towards cost of asset u/s 43(6) of the Act – Held that:- Interpreting the issue of depreciation ‘actually allowed’ in a case where assessee was not taxable under the Income Tax Act till a particular A.Y. in Kandla Port Trust vs. ACIT [ 2006 (4) TMI 243 - ITAT RAJKOT] it has been held that in the case of such previously exempt entity, since there was no liability to tax, there was no occasion to compute the income of such assessee under the provisions of Income Tax Act - the depreciation provided in the books in the years when the income was exempt cannot be treated as the depreciation “actually allowed” - when the assessee was not required to compute profits and gains of business or profession under the Income Tax Act, mere passing of accounting entry made for depreciation in the books of accounts was not the depreciation “actually allowed” as there was no liability to tax and hence, no assessment for the period - written down value for the purpose of assessment would be the original cost, less, NIL - the original cost becomes WDV. Assessee was exempt from Income Tax u/s 10(20) up to A.Y. 2002-03 - Explanation-6 to section 43(6) is applicable to the assessee’s case - the amount of depreciation provided in the books of accounts up to the previous year relevant to the AY shall be considered as depreciation ‘actually allowed’ under the Act - the WDV as per the books at the beginning of the A.Y.2003-04 becomes WDV for the purpose of section 43(6) - since Explanation-6 has overriding effect and is clearly applicable to the assessee’s case, the entire exercise of re-determining the WDV from year of inception till AY 2002-03 cannot be upheld at all - assessee’s contention that WDV at the beginning of A.Y. 2003- 04 in the books of accounts should be considered as WDV for the purpose of Income Tax Act is upheld – the AO is directed to verify and allow the depreciation keeping in mind facts and law, specifically the Explanation-6 of Sec.43(6) - the claim of depreciation is to be remitted back to the AO for adjudication – Decided in favour of Assessee. Validity of re-opening of assessment – Held that:- Assessee raised various issues on reopening of the assessment in A.Y. 2003-04 considering that depreciation details were not given fully even as of today so as to consider the depreciation allowable - the reopening of assessment is to be upheld at least for the purpose of determining the depreciation allowable in A.Y. 2003-04, so that WDV for A.Y. 2004-05 can be arrived at - even though assessee has raised certain legal issues on issue of reopening, the reopening for A.Y. 2003-04 is also upheld on the same reasons as in AY 2004-05 – Decided in favour of Assessee.
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